2,000 jobs to go at Northern Rock

Newcastle-based Northern Rock has announced it will shrink its residential mortgage lending by half and is to shed approximately 2,000 jobs.

The job cuts, which make up about a third of its staff, will be made by 2011 under plans to turn around the bank’s fortunes.

Northern Rock is one of the biggest employers in the North East, with approximately 6,500 staff. A task force, the Northern Rock Response Group, has been set up to assist those affected find new employment.

After rejecting takeover bids from the board of Northern Rock and a consortium led by Sir Richard Branson’s Virgin Group, the Government rushed through legislation to nationalise the bank last month.

According to Ron Sandler, the bank’s chairman, Northern Rock’s savings and mortgage rates will be ‘beyond reproach’.

Mr Sandler was responding to rivals’ criticism that Rock is using its £100 billion of Government support to give savers better rates than they can afford to offer on commercial terms, particularly given the continuing credit crisis.

Mr Sandler said a lot of things have been said about our products – not all of them accurate. Our current savings rates range between 6% and 6.25%, which is well within the bands generally seen across the market.

We do not want to be seen using Government support in a way for which we can be criticised. We are determined to ensure we do not compete unfairly and we will make sure that our products are beyond reproach, added Mr Sandler.

It has also been revealed that Northern Rock will effectively withdraw from its Danish business where it has also faced strong criticism from domestic rivals.

Responding to the job losses, Mr Sandler said they are ‘regrettable’ but necessary as the bank shrinks itself by about half over the next few years and repays the £25 billion of emergency loans it has had from the Government.